Cement prices in India improve, maximum hike in southern India

June 2021
Cement prices in India improve, maximum hike in southern India

In June, cement prices improved across India. On a month-over-month (m-o-m) basis, Kotak Institutional Equities' latest dealers channel check revealed that all-India prices rose 4% to Rs 376 per 50 kg bag. This was sparked by an 11% m-o-m increase in prices in southern India, which rose to Rs 415 per bag.

The cement industry has been experiencing cost pressures in recent months as prices for key input materials such as petroleum coke (pet coke) and coal have continued to rise. Pet coke prices have stabilised at 130 dollar per tonne in the 1Q of FY22, but are up 14% sequentially. Similarly, international coal prices have increased by 16 % compared to the March quarter of FY21.

Cement companies raised prices in March to protect their operating margins. Low-cost inventory and operating leverage helped key cement manufacturers' margins in Q4FY21.

The monsoon season falls in the second quarter of the fiscal year, making it a seasonally weak quarter. Cement prices have historically corrected by 2% to 3% in the July-September quarter. However, since 1QFY22 was impacted by the lockdown, dealers believe sequential demand recovery will keep prices stable in the near term.

Expect the Ebitda or tonne to improve sequentially in Q1 FY22, owing to the limited impact of fuel cost increases cushioned by mix optimisations and sustained increases in cement prices over the last few months. However, analysts at JM Financial Institutional Securities Ltd said in a report that a drop in volumes due to Covid-19 could partially offset the gains.

Ebitda is short for earnings before depreciation, interest, tax and amortisation.

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